Franco-Nevada Corporation Q2 FY2026 earnings call

Portfolio Growth & Development Progress

• The company follows a strategy of growing through acquisitions in bear markets and organic growth in bull markets, with organic growth enabled by its deep royalty portfolio delivering strong results this quarter
• Multiple mines announced expansion plans: Cote, Detour, Maginot, Valentine, Conestable, Casarones, and Seguela; Porcupine's recent acquisition may ultimately double output; Guadalupe, Hemlo, Buller Bulling, and Ormac announced resource expansions
• Key permitting milestones achieved: Crawford Nickel received federal approval, and PSJ Mendocino (previously San Jorge) secured Argentinian regulatory approval; active positive exploration results were reported across the Porcupine Camp, Borden Oil, Out Creek, Midas and other assets

Energy Market Dynamics

• U.S. lower 48 oil rig count increased to 450 from 420 three months prior, and average reinvestment rates among U.S. producers rose to 55% from 51% earlier in 2026, which supports expectations of higher future production

Financial & Sustainability Highlights

• The company achieved record first half 2026 results for revenue, adjusted EBITDA, adjusted net income, and operating cash flow; Q2 2026 total revenue rose 57% year-over-year, adjusted EBITDA rose 45%, and adjusted net income rose 46% to $349.2 million ($1.81 per share)
• The portfolio remains highly diversified: 88% of revenue is sourced from the Americas, and no single asset generates more than 10% of total revenue; adjusted EBITDA margin expanded to 91.2% year-over-year, supported by a higher mix of lower-cost royalty deals
• Franco Nevada was named one of Canada's Best 50 Corporate Citizens for 2026 and achieved an A rating from CDP; the company maintains a debt-free balance sheet with $4.3 billion in total available capital as of June 30, 2026, comprising $1 billion in cash, $2.25 billion in credit facility capacity, and $1.2 billion in liquid market securities

Cobre Panama Update

• The completed environmental audit found no major issues, with an 87.7% overall operational compliance rate; the Panamanian government has formed a senior minister commission to evaluate environmental aspects and economic contribution for a potential mine restart; First Quantum has begun processing stockpile ore

Precious Metals: Revenue was 86% of total Q2 2026 revenue. Total GEO (gold equivalent ounces) sold for the segment hit 114,111, a 23% year-over-year increase, representing 56% of total GEO sold from primary precious metal mines. Key asset performance: Antimena revenue rose from $23.3 million in Q2 2025 to $57.4 million in Q2 2026, driven by higher deliveries and silver price gains; Antipakai saw higher revenue from processing higher-grade ore; South Arturo had a significant GEO increase from Phase 1 open pit production, with performance weighted to H1 2026; Candelaria production was lower year-over-year due to shifted higher-grade ore availability to H2 2026.

Diversified & Energy: Diversified revenue hit $82.2 million, a 31% year-over-year increase, though GEO sold fell slightly to 18,209 from 19,644 year-over-year due to conversion at a higher fixed gold price. Energy revenue grew on higher oil prices, with WTI prices remaining above $80 per barrel after a sharp year-over-year increase; the NPI leverage on the Muscle White interest provided a notable boost to the Canadian energy segment.

• Full year 2026 total GEO sold guidance is maintained at 510,000 to 570,000 GEO; after selling ~269,000 GEO in the first half of the year and with expectations of stronger H2 performance, management is now tracking towards the upper half of the guidance range, with the possibility of exceeding the range but no formal upward revision at this time
• Stronger H2 2026 performance is expected from Candelaria, Cote Gold, Valentine Gold, and TokenZinio; the company expects to receive 9,000 to 10,000 GEO from Cobre Panama from stockpile processing
• Energy revenue is expected to remain strong in H2 2026 supported by continued elevated oil prices; higher U.S. drilling activity is expected to translate to higher energy unit production volumes by late 2026 or early 2027, creating a volume tailwind independent of pricing
• The step-down in the Candelaria stream is currently expected to occur in the first half of 2027, though it could happen as early as late 2026 depending on 2026 production volumes

• Production volatility is inherent to net profit interest (NPI) assets such as Hemlo and Muscle White, with output dependent on operator development progress, mine sequencing, and commodity prices
• Hemlo's production ramp-up is progressing slower than initially expected, with operator guidance deferred to 2027, though management expects production to increase in H2 2026 relative to Q2 and remains confident in long-term output from the asset
• The Cobre Panama mine restart remains subject to negotiation between operator First Quantum and the Panamanian government, with no guarantee of a successful outcome or full restart timeline
• Large acquisition transactions have longer, uncertain timelines, and there is no certainty that all pipeline opportunities will close or meet return expectations
• The Karma dispute remains unresolved, with management continuing to pursue legal remedies under Ontario law to challenge the existing judgment, and the asset is carried at zero book value

Q: Analyst asks why adjusted EBITDA margin has expanded to 91.2%, and if management is satisfied with this level. / A: Management explains the high margin reflects the current portfolio mix, with recent transactions being predominantly royalty deals that have little to no associated costs, creating leverage for overall portfolio margins. This aligns with Franco Nevada's inherent high-margin business model.

Q: Analyst asks why guidance only forecasts the upper half of the existing range rather than raising the range, given projected contributions from Cobre Panama and high oil prices. / A: Management confirms that while multiple assets are expected to outperform, South Arturo's performance is weighted to H1, so net performance is tracking to the higher end of the existing range. Management notes that exceeding the range is possible but requires multiple factors to align, so the existing range is maintained for now.

Q: Analyst asks about the acquisition pipeline, noting recent deals have been small despite $4.3 billion in available capital, and if a special dividend would be considered if large deals do not materialize. / A: Management states the pipeline covers all deal sizes, and recent smaller deal volume is not indicative of future pipeline activity. Large transactions are typically lumpier with longer timelines, with activity expected to pick up later this year and into 2027. Management expects to deploy most capital through acquisitions before considering alternative capital return actions like special dividends.

Q: Analyst asks if Franco Nevada has engaged with the Panamanian government on Cobre Panama restart and potential changes to the stream's fiscal terms. / A: Management clarifies that First Quantum is the operator and the lead party for all government engagement, and there have been no formal negotiations on restart terms to date. Franco Nevada has not participated in any discussions, and there are no ongoing discussions about changing the stream's economic terms.

Q: Analyst asks what would happen to capital allocation if IAM Gold exercises its option to buy back half of the Cote Gold NPI for $500 million. / A: Management notes that any such cash inflow would not be used for a special dividend. The company is comfortable holding cash on the balance sheet for future acquisition opportunities, but could use the additional capital to increase the regular dividend at a faster pace than prior years.